Welcome to the Quest Diagnostics Fourth Quarter and Full Year 2021 Conference Call. At the request of this company, the call is being recorded. The entire contents of the call, including the presentation, and the question-and-answer session that will follow are copyrighted property of Quest Diagnostics, with all rights reserved. Any redistribution, retransmission or rebroadcast of this call in any form without written consent of Quest Diagnostics is strictly prohibited. Now I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Thank you and good morning. I'm joined by Steve Rusckowski, our Chairman and Chief Executive Officer and President; Mark Guinan, our Chief Financial Officer; and Jim Davis, our Executive Vice President, General Diagnostics and Chief Executive Officer-Elect. During this call, we may make forward-looking statements and we'll discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties, including the impact of the COVID-19 pandemic that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, and current reports on Form 8-K. The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows and/or its financial condition will be primarily driven by the pandemic severity and duration, health care insurer, government and client payer reimbursement rates for COVID-19 molecular tests, the pandemic's impact on the U.S. health care system and the U.S. economy, and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic, including the impact of vaccination efforts, which are drivers beyond the company's knowledge and control. For this call, references to reported EPS refer to reported diluted EPS, and references to adjusted EPS refer to adjusted diluted EPS. Any references to base business, testing, revenues or volumes refer to the performance of our business, excluding COVID-19 testing. Growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth and adjusted earnings growth, are compound annual growth rates. Finally, revenue growth rates from acquisitions will be measured against our base business. Now, here is Steve Rusckowski.

Thanks, Shawn and thanks everyone for joining us today. Over the past two years, our 50,000 Quest employees have risen to the challenge of COVID-19, innovating, persevering, and remaining committed to the patients and customers we serve. While doing so, they also grew our base business by more than 19% in 2021, achieving record levels. I'm extremely proud of what we have accomplished as a team. So we have a lot of news to cover this morning. And I want to get into that so we can have your questions. So let's get started. So first, I'll start by sharing some color on the leadership transition we've announced this morning. Then we'll review our performance for the fourth quarter and the full year of 2021. And then finally Mark will provide more detail on our financial results and talk about our financial outlook for 2022. So as you have seen, in our announcement this morning, we've begun implementing a gradual leadership succession plan, under which Jim Davis, Executive Vice President of General Diagnostics will succeed me to become Chief Executive Officer on November 1, 2022. At that time, I will continue to serve on the Quest Board of Directors as Executive Chairman. Quest Diagnostics is a great company that is well-positioned to continue to deliver shareholder value. As I approached a decade in the role, the Board and I determined that now is the right time to begin to turn over the helm to a new leader. Jim Davis is extremely well qualified to be CEO, having managed a large part of this company in his role as Executive Vice President. He has deep knowledge of Quest, the healthcare industry and the corporate world, gained through more than 35 years of business experience. Jim is widely respected and will be a strong CEO. When I took this role nearly 10 years ago, Quest was not growing, nor realizing its potential. We launched a new strategy, our new Quest to drive transformational change. To drive that change, we built a new leadership team, and Jim has been a key member of that team. We built a business strategy to accelerate growth and drive operational excellence. To drive growth, we focused on improving relationships with health plans, hospital health systems, and expanding fast growing businesses, in advanced diagnostics, and consumer testing. In addition, we've added about 2% revenue growth on average through accretive, strategically aligned acquisitions over the last several years. We have driven operational excellence, and our Invigorate program has consistently improved quality and customer experience, while generating 3% productivity each year. And we've made our company more inclusive by increasing the diversity on our Board, and amongst our management ranks. Finally, we established Quest for Health Equity in 2020, over $100 million committed to reduce healthcare disparities among underserved in the United States, particularly communities of color. I am very proud of what we've accomplished together. And if you consider the opportunities in front of us, in many ways, we're just getting started. We have a strong team and Jim as a key leader in our transformation. He runs our General Diagnostics business, which accounts for more than 80% of revenues and three quarters of our employees. He manages operations, including sales and marketing, patient services, logistics, laboratories, billing and customer services. He also oversees the Drive Operational Excellence strategy, which includes our Invigorate program. He has provided enterprise oversight for pandemic response. And if that wasn't enough, he's also led the development of Quest ESG strategy. So Jim, congratulations. I look forward to working very closely with you through this transition.

Hey, thanks Steve, and I really look forward to working closely with you over the next eight months, and ensuring a very successful transition. It's a tremendous honor to have the opportunity to succeed you in Quest and lead Quest into the next stage of our growth. We have a very powerful vision in Quest of empowering better health and diagnostic insights. Our business strategy is straightforward and well understood. And our company has never been more central to patients and to the health care system, as we've seen during this pandemic. I really look forward to working with the management team and all 50,000 employees to build on the strong foundation that Quest has put in place. Quest's future is really bright. And we're extremely well positioned to continue to create value for shareholders, and all that we serve.

Thanks, Jim. Now at the same time Mark is planning to retire this year. Mark has been in his role for more than eight years, and helped navigate us to the strong position where it is today. We have begun a process in which I will be working closely with Jim to identify Quest's new CFO, and Mark will participate in the selection process. He will remain in the role through the transition. Mark, I want to thank you for your many contributions, your partnership and your friendship. You've been a key member of our leadership team and we have transformed Quest and accelerated its growth.

Thanks, Steve. I appreciate the kind words. I just want to take a minute to say that I'm proud to be part of an important company that makes a positive contribution to the country, and I've enjoyed being part of it. Now it's time for me to step back and retire. I'm looking forward to participating in the process to identify my successor who can support Steve and Jim in Quest's next phase of growth.

Now turning to our results, we closed out 2021 with another record year of revenue, earnings and cash from operations. Our base business recovered throughout the year, and we experienced strong demand for COVID-19 testing services. So for the full year 2021, total revenues grew by more than 14% to $10.8 billion. Earnings per share increased by nearly 49% on a reported basis to $15.55, and more than 27% on an adjusted basis to $14.24. Cash provided by operations increased by more than 11% to $2.2 billion. And for the fourth quarter, total revenues were $2.7 billion, a decrease of roughly 9% versus 2020 when COVID-19 volumes were surging. Earnings per share were $3.12 on a reported basis, and $3.33 on an adjusted basis, both down approximately 26% versus the prior year. So I'd like to share some perspective on the role of COVID-19 testing going forward. A lot of progress has been made in the battle against COVID-19. But we believe it isn't going away anytime soon. Our molecular product began this year strong, with volumes peaking in January. Testing will continue to play an important part of managing COVID-19, and we believe that molecular testing remains the gold standard. We continued to perform well throughout the surge, maintaining average turnaround times of two days or less for COVID molecular testing. We will continue to maintain appropriate testing capacities and staffing levels to be prepared for any additional surges throughout this year if they emerge. We also continue to believe there will be a bigger role for serology testing, and how we measure COVID-19 protection going forward. Ultimately we expect COVID-19 testing to eventually become more flu-like and become a permanent part of our portfolio going forward. Now turning to our base business, we continue to make progress executing our two point strategy to accelerate growth and drive operational excellence, while we delivered 2% revenue growth on our base business from acquisitions again last year. In the fourth quarter, we acquired the assets of Labtech Diagnostics, a regional independent laboratory, serving physicians and patients primarily in South and North Carolina, Georgia and Florida. This is the first full service laboratory owned by Quest in South Carolina. We also recently announced our acquisition of Pack Health, a patient engagement company that helps individuals adopt healthier behaviors to improve outcomes. This acquisition will bolster our extended care capabilities. Since 2012, we have completed more than 40 acquisitions, including outreach laboratories, regional independent laboratories and capability enhancing deals. And over the last four years, we've achieved our target of greater than the average of 2% revenue growth on our base business each year from acquisitions. And then finally, our M&A appetite remains strong. In 2021, we took full advantage of our strong health plan access, which is approximately 90% of all commercial insurer lives in this country. We also made good progress working together with our plans to help companies and their employees save money by reducing denials and out of network leakage. Our clients also recognize the value of working with us and we have grown our health plan revenues faster than our overall revenues to the best level we've ever seen. Hospital health system revenues have grown more than 20% compared to 2019 levels, excluding COVID-19 testing, driven largely by the strength of our professional laboratory services contract. Our performance in 2021 benefited from our two largest PLS contracts to-date, Hackensack Meridian Health and Memorial Hermann. Altogether our PLS business without COVID-19 exceeded a record $500 million in annual revenue last year. Hospitals continuously faced pressure throughout the pandemic. Post-pandemic we believe the same will be true. We believe there will be a continued consolidation and ongoing challenges that afford Quest an opportunity to implement our flexible solutions that help hospitals become more effective and productive. Advanced diagnostics is critical to the future of healthcare. We're building strong momentum in our key growth drivers, which include consumer and hereditary genetics, oncology and pharma services. In 2021 these test categories accounted for several hundred million dollars of advanced diagnostics portfolio, and they are growing more than 25% versus 2020, and nearly 33% versus 2019. We are investing aggressively in areas with potential for future differentiation to grow our advanced diagnostics value proposition, including automated tests, next gen sequencing, bioinformatics, the sales force and customer service. We're leveraging our scale and expertise to give patients and providers greater access to important innovations such as liquid biopsy, and digital pathology. Advanced diagnostics is one of the fastest growing areas of our portfolio. Our strategy and investments in this area will enable us to achieve high single digit revenue growth going forward. Now we're equally excited about the opportunities we see in our direct-to-consumer test vertical. Revenues for QuestDirect services nearly doubled to more than $70 million in 2021, driven by both the base business growing and COVID-19 testing. We expect that non-COVID consumer diagnostic market will experience double digit growth over the next several years. And we're on track to build a $250 million direct-to-consumer business by 2025. We're ramping up our investments in this business, launching a new improved digital experience later this year. And we're also investing in enhancements to the in-person customer experience at our patient service centers. So lots of good stuff in 2022. We're building on our long term relationships with Walmart by recently launching a consumer initiated laboratory testing on walmart.com, through our solution powered by QuestDirect. And the MyQuest platform now has nearly 23 million users, up more than 3 million in the past quarter. We are very excited about our longer term growth opportunities in advanced diagnostics and direct-to-consumer testing and our increasing investments we made in 2021 to strengthen our business and accelerate growth beyond the pandemic. These investments were made possible with the record cash and earnings we generated over the past two years. As part of our two point strategy to drive operational excellence, we remain laser focused on improving both operation quality and efficiency which go hand in hand. Through 2021 the Invigorate program exceeded our goal of 3% productivity improvement. We made good progress last year in procurement supply savings as well as reducing unplanned denials, and improving patient collections at the time of service. While we faced modest inflationary wage pressure in 2021, on the supply cost side, we have more than offset any increases with cost savings from our suppliers. Historically, our Invigorate productivity savings have been net of any inflationary increases. Beyond that we continue to drive additional productivity improvements with platform consolidation and greater use of automation and artificial intelligence. Now turning to our workforce. Quest employees are highly engaged, based on results of our quality surveys. In a challenging labor market, we are focused and are still seeing improvement in engagement and retention. Our team has done a lot to create an inspiring workplace. And we continue to do everything we can to attract, recruit and retain talent. We're entering 2022 in a strong position within the lab industry and more broadly throughout healthcare. Our base business is poised to build off the record revenues we've achieved last year and we're investing to accelerate growth. We expect to see continued demand for COVID-19 testing services, albeit at lower levels than the last two years. The delay of the 2022 PAMA cuts announced last year was a good outcome for industry and Medicare beneficiaries. However, we will continue to be hard at work in 2022, with our trade association and Members of Congress with the goal of arriving at a permanent fix to PAMA. We remain committed to our capital deployment strategy of returning the majority of our free cash flow to our shareholders. This morning, we raised our dividend for the 11th time since 2011. We expect to have more than $1 billion in cash available this year for M&A and share repurchases. So putting it all together, our 2022 guidance reflects strong momentum and investment in our base business, balanced with the inevitable but expected decline in COVID-19 testing revenues. Before turning over to Mark, I'd like to recognize and thank once again, all of our employees who really have been at the frontlines of the pandemic and continue to serve the healthcare needs of patients who depend on Quest every day. Now Mark will provide more detail on our performance and our 2022 guidance. Mark?

Thanks Steve. In the fourth quarter consolidated revenues were $2.74 billion, down 8.6% versus the prior year. Revenues for Diagnostic Information Services declined 8.5% compared to the prior year. The decline reflected lower revenue from COVID-19 testing services versus the fourth quarter of 2020, partially offset by continued growth in our base testing revenue. Compared to 2019, our base DIS revenue grew approximately 6% in the fourth quarter, and was up more than 1% excluding acquisitions. Volume measured by the number of requisitions increased 1.3% versus the prior year, with acquisitions contributing 1.1%. Compared to our fourth quarter 2019 baseline total base testing volumes increased by more than 10%. Excluding acquisitions, total base testing volumes grew approximately 5% versus 2019 and benefited from new PLS contracts that have ramped over the last year. The progress we've made in our base business throughout 2021 continued in the fourth quarter, and base testing volumes remained consistent with our prior outlook. As many of you know COVID-19 testing volumes moderated early in the fourth quarter, following the peak of the Delta wave in September, but then surged again in early December as the Omicron variant spread across the U.S. Together with our JV partners Sonora Quest, we resulted approximately 7.9 million molecular tests. Quest alone resulted roughly 7.3 million molecular tests and nearly 730,000 serology tests in the fourth quarter. In January, our COVID-19 molecular volumes averaged approximately 120,000 tests per day, and over 139,000 per day, including Sonora Quest, with volumes peaking in the middle of the month. Revenue per requisition declined 9.8% versus the prior year, driven primarily by lower COVID-19 molecular volume. In the fourth quarter increases in our base revenue per requisition were more than offset by the impact of recent PLS revenues. Modest unit price headwinds remained consistent with our expectations. Reported operating income in the fourth quarter was $536 million, or 19.5% of revenues, compared to $795 million, or 26.5% of revenues last year. On an adjusted basis operating income in Q4 was $579 million, or 21.1% of revenues, compared to $860 million or 28.6% of revenues last year. As you may recall, updated 2021 guidance we shared in October contemplated a lower adjusted operating margin both year-over-year and versus 3Q. The year-over-year decline was primarily driven by lower COVID-19 testing revenue and higher COVID-19 testing costs, headcount and wage increases and ramping strategic growth investments. It's important to note that over time, a growing portion of our COVID-19 molecular testing volumes have come from non-traditional channels, which carry additional expenses and logistics cost. Also spiking COVID-19 positivity rates across the country in December eliminated our tooling capability, which further increased COVID-19 testing costs later in the quarter. In addition, we also experienced higher than anticipated employee healthcare costs in the fourth quarter, primarily related to COVID-19. Reported EPS was $3.12 in the quarter, compared to $4.21 a year ago. Adjusted EPS was $3.33, compared to $4.48 last year. Cash provided by operations was $2.23 billion in 2021, versus $2.01 billion in the prior year. We completed our $1.5 billion ASR in November, and repurchased that additional $310 million in stock in the fourth quarter. This brings total share repurchases to more than $2.2 billion in 2021. And we ended the year with $872 million on the balance sheet. Before turning to guidance, I'd like to comment on recent trends we've seen in our labor costs. As Steve noted, we've been managing through a challenging labor environment, while wage inflation including our annual merit increase is expected to be between 3% to 4% this year. The increase in our total salaries, wages and benefits is expected to be below 3% in 2022, given the reset of our annual performance compensation, and lower expected overtime. As a reminder, all of our employees are eligible for annual performance-based compensation. Now turning to guidance. We are giving full year 2022 results as follows. Revenue is expected to be between $9 billion and $9.5 billion, a decline of approximately 12% to 17% versus the prior year. Base business revenues are expected to be between $8.3 and $8.5 billion, an increase of approximately 3.5% to 6%. COVID-19 testing revenues are expected to be between $700 million and $1 billion, a decline of approximately 64% to 75%. Reported EPS expected to be in a range of $7.63 and $8.33, and adjusted EPS to be in a range of $8.65 to $9.35. Cash provided by operations is expected to be at least $1.6 billion and capital expenditures are expected to be approximately $400 million. Before concluding, I'll touch on some assumptions embedded in our 2022 guidance. As Steve said, we're entering 2022 in a strong position. Our guidance assumes COVID-19 molecular volumes to average between 65,000 to 80,000 tests per day in Q1, representing a decline from January levels, and approximately 20,000 to 35,000 tests per day for the full year. For COVID-19 serology volumes the guidance assumes approximately 3,000 tests per day for the full year. Our guidance does not currently anticipate another COVID wave. We will remain ready from an operational standpoint to handle any future surges. Last month, the public health emergency was again extended another 90 days through April. We assume average reimbursement for COVID-19 molecular testing to hold relatively steady through this period. While the public health emergency could continue to get renewed beyond April, additional extensions are not captured in our guidance. The revenues generated from COVID-19 testing have afforded us an opportunity to continue to increase investment in our business. As Steve noted earlier, we continued to ramp investment in our growth pillars, particularly the advanced diagnostics and direct-to-consumer testing opportunities. We are planning to invest approximately $160 million in our growth initiatives this year, which represents an additional $90 million in investments in 2022 versus 2021. We also continue to incur hard costs to manage our business through the pandemic, including expenses to comply with CDC guidelines, address ongoing supply chain challenges and maintain adequate staffing levels. We currently forecast these expenses to be approximately $50 million in 2022. As a reminder, we originally expected PAMA cuts of approximately $80 million in 2022. These cuts were delayed one year until 2023. Finally, we ended 2021 with approximately 124 million diluted shares outstanding. Our guidance assumes no change in our share count in 2022, and only enough share repurchases to offset our employee equity programs and to meet our commitment of returning the majority of our free cash flow to our shareholders. I will now turn it back to Steve.

Thanks Mark. Well, the Sunrise team had another record year providing critical COVID-19 testing for our country and delivered record revenues, earnings and cash from operations. We also grew our base businesses to a record level of 19% versus the prior year. Quest is well positioned in 2022 to deliver on its commitments. I'm proud of the incredible accomplishments of our 50,000 Quest employees throughout the pandemic. And finally, our team is strong, the business has never been better, and Quest's future is bright as we begin a gradual transition to new leadership. Thank you. Be happy to take your questions.

Thank you. We will now open it up to questions at the request of the company. We ask that you please limit yourself to one question. If you have additional questions, we ask that you please fall back into the queue. And the first question is coming from Jack Meehan, Nephron Research. Your line is open.

Hey, good morning. First, I know this isn't the end. But congrats Steve and Mark on the retirement and Jim, congrats on earning the big feat. Agreed, it's very well deserved for you.

Hey, Jack.

So first question. There's been a lot of anxiety around pressures on the lab industry, which I personally find very interesting, because historically, that's actually been the bull case for Quest. So it would just be great to get your thoughts on what you're hearing from hospitals around outsourcing. Have you picked up any new contracts and potential for share gain versus some of these regional independent labs?

Yeah, thanks, Jack, for the question. There is a lot of pressure in our industry, and particularly at hospitals. And so we are seeing continued interest and are working with hospital systems and helping them become more efficient and productive with their professional lab services business. That continues to be a big opportunity. You saw in our prepared remarks it grew nicely over the last couple of years. We have a half a billion dollar business, and therefore that moves our enterprise a significant level. So that's number one. Number two, we are very strong, and we continue to drive operational excellence. As you all know, this is not new, it's institutionalized in Quest. We believe we have the cadence and the capabilities to continue to offset any inflationary pressure we have. And we've done that. We did it last year, we'll continue to do that going forward. And as I said, in my introductory remarks, Invigorate helped us do that. We talked about inflationary pressures on our cost of sales. The Invigorate savings is a net number. So any increases are offset by the savings and it's always been positive for us and getting more savings than cost increases. And so despite some pressures that we see, because of the current times, we're offsetting that, and going forward, we do see that smaller laboratories will have a tougher time keeping up with some of these structures. And therefore, we do have an advantage. We saw the acquisition we just did in South Carolina; we are achieving that 2% growth from acquisitions. So therefore, we believe our strategy has positioned us nicely going forward to take advantage of the changes in front of us given these different times than we've ever seen. So Mark anything you'd like to add to that.

Yeah, I think the other thing that's evolving Jack that you didn't mention, I'm sure it's on your radar, is moves towards transparency in pricing, whether it's surprise billing. Now, certainly it's complicated. So even for us, it's not simple, it would depend which commercial insurer, depends on who your carrier is and so on. So it's not simple to tell people exactly what their cost is. However, it's absolutely an advantage for the national labs, specifically for Quest. So we're encouraged by some of this. It's kind of one of those secrets that a lot of people aren't aware how much better our value is compared to others. So we really see that together with some of the things you mentioned as another reason that we're going to continue to pick up share and really return to those historic rates we were having before the pandemic started, with greater access and the knowledge, tools and value that we bring well beyond our price, including our real time estimation tools, including our MyQuest app, and all the other things that really enhance the patient experience.

Great, and as a follow up on the disclosures around the fourth quarter detection testing system, 7.9 million total, 7.3 resulted by Quest, 600,000 through the referral network. Can you talk about just the profitability on the tests that accrue to the referral network versus those resulted by Quest? Because I think people are just trying to figure out the relative margin upside versus revenue and wondering if maybe that was a factor we weren't considering.

Yeah, so to be clear, except for the referral network, we have a JV with Sonora Quest. So we wanted to make sure that people were aware that we're doing some math around testing volumes that we don't actually record that revenue, because we have a minority ownership stake. So we get a proportionate share of the earnings from Sonora Quest, as we do with our other minority holdings, as we do with our majority holdings to equity earnings. So we just wanted to drive that transparency. But in terms of pricing, and so on, I won't comment specifically on Sonora Quest. But it's not dissimilar, it's not a totally different profit structure than the things that we do ourselves. Jack, during this period less than 5% of our total volume is sent out to a referral lab. At this point in time, its effect is immaterial. So it's only during a surge, that we have to rely on external partner labs to help us. Yes, what I did refer to Jack, and maybe that's what you were asking about was non-traditional channels. And so that's not where we're sending the work. It's actually how we're getting the specimens. So a lot of the work especially early was through traditional channels, or hospital partners, where we were going anyways, to collect specimens, and we would leverage all the Quest logistics. In cases where we had people going to our acute care centers, we're leveraging that. In this case, we're actually getting it from other providers, CVS is the most notable one. As we do that, we have to have an incremental logistics structure with those incremental logistics runs. Then we do pay a fee. You kind of think about it kind of like phlebotomy, but all the work they do to collect the specimen, to engage the administrative costs of the patient to give them the results, and so there is a cost that maybe people weren't aware of when we're not getting that specimen to our traditional infrastructure.

Great. Thanks for clearing that up.

Operator, next question?

The next question is coming from Ann Hynes, Mizuho Securities. Your line is open.

Good morning, Ann.

Good morning. Congratulations to Steve, Mark, and Jim.

Thank you.

I just want to ask about margins, because obviously, the stock's down or underperforming year to date versus some peers. And I think there's debate on the street about the margin profile for Quest ex-COVID. I know you guys saw a lot of pressure in Q4, it was worse than expected. And a follow up to that is, again you just got to 2022. People are really focused on what your margin profile will be in 2023. In your prepared remarks, Mark, you did talk about growth initiatives that are in 2022 to $160 million, and I think you said $50 million for incremental costs. But I guess like, there's so many moving parts with extra labor costs, extra supply cost, you have these growth investments. I guess if we look out to 2023, not giving guidance, what do you think is repeatable and what is not? Maybe you can just comment on the health of how you view your base margins, and the base business, that'd be great.

Yeah, so thanks for the question, Ann. It's an important one. So first off, we're not deviating from our long term outlook. So we've shared a long term outlook in March of 2021. And while the CAGRs are going to change, because we're going to have a stronger year in 2022, the absolute numbers we're not deviating from because they're largely the base fitness. So we still assume that COVID will materially decline, time will tell. At that point, it's really all around our base business. So when people are looking at the current profitability of the base business, and I can understand how this happens. One of the flaws of that is that you really can't do the two in isolation. So let me give some examples. Because we've had such a surprisingly strong year this year relative to what we expected, driven by COVID, we're paying a significantly higher incentive performance bonus. And that's across the whole employee base. And right now, that would not be expected to be repeated next year. So that, effectively, inflated our costs. And so to assign all of that cost against the base business, which is what implicitly is done when you do COVID revenue times a certain margin drop through, and then you assume back against the base business, that is not accurate. The other thing is, we have significant incremental costs related to the pandemic, which I mentioned in the prepared remarks, around $50 million of cost. If COVID really goes away, we would expect those costs will largely go away. And those costs should be assigned to COVID, not to the base business. We had quite a bit of overtime later in the year. And that was related to employee absences driven by the COVID surge, and we spent about $25 million more in 2021 than we historically spend in overtime. And we would expect that would go away, as well, as COVID starts to step back. And so again, that is implicitly put against the base business, when you do the high level math that I've seen a lot of people do. And so the way to think about the base business is obviously from our guidance, we are hundreds of millions of dollars above where we were in 2019. We expect to be back to the growth that we were experiencing pre-pandemic. If you look at the first two months of 2020, before the pandemic started, even after a full year of the network access teams we have in 2019, we're still growing mid-single digits. We're going to get back to that growth in the base business. And the profitability of the base business is going to be similar to what it was before 2019. So hopefully, that puts all the pieces together for you. Obviously, if there's anything I can clarify, I'd be happy to take a follow up.

No, that's very helpful. And just as a follow up, just to your growth initiatives, like the $160 million incremental in 2022. How should we view that for 2023?

Right, so some of those will ramp down, because there are discrete investments to get us where we need to get to. For instance, a big piece of that is building what we need for our consumer business to move from where we were to a more Amazon-like experience for patients who want to find tests and order it, pay their bill, et cetera. It takes a lot of work with marketing analytics to do the appropriate marketing and understanding of customer preferences, and respond to customers in an appropriate way. A lot of IT investment in the near term to get us to that future state. Now as we're growing that business to a $250 million business, which is what we said we would get to by 2025, there are going to be some ongoing costs, because we're adding people to support that business. It isn't a mature business. And there are going to be some variable costs with that. However, as we grow those businesses, we're going to grow fast. And so some of those ongoing costs are going to get paid for by that faster growth. Similarly, advanced diagnostics, as we accelerate that growth, some of the resources we're adding today that we're calling out are going to be in the run rate and profitability going forward. So the costs don't go away completely, but they will ramp down because some of this is startup expenses. And then that revenue, obviously in the end, the margin is going to pay for those incremental costs over the next several years. Remember, when we talked about this year, these investments really started in the back half of 2020. And we talked about an exceptional year in 2020. We talked about an exceptional year in 2021. And therefore we took advantage of the opportunity and invested in accelerated growth entirely consistent with what we shared with you as our growth portfolio. And what you're seeing in our results and ranges are the benefits of those investments; you're seeing great growth in our focus areas of advanced diagnostics. I highlighted those areas of our portfolio that we focus on. These are not insignificant portions of our portfolio. I shared several hundred million dollars of focus for us that are growing strong double digits versus last year and versus 2019. And then our consumer testing business has grown considerably. We're already starting to see the benefits. So as with any of that we certainly expect a business return. We're getting some evidence of return already. '21 looks like more of it than '22. And so when we get into '23, you've got to track that. They were not served in the beginning. What we're putting on right now is exactly what we laid out on Investor Day. We have a baseline coming out of '22 that we believe in, and what we just shared in our '22 guidance is entirely consistent with that. And we will continue to grow our earnings. The high growth we highlighted 7% to 9%, and that will continue through '23 and '24. So we feel what we've done so far, and what we delivered is entirely consistent with what we believe the prospects are. We do believe the opportunity in front of us are even more attractive than before, because we funded and accelerated the program.

Yeah, just one point of clarification. So the 7% to 9% was when we thought we could do $7.40 to $8 in 2022. And we said we'd be at the upper end of that. So you can pick your number between $7.40 and $8, carry forward through '23 and '24. And that dollar level of EPS is what we're saying we can still do. Obviously, since 2022 is turning out based on our guidance, a lot higher than we said in March, the CAGR is going to be lower. But the absolute numbers we're still committed to at this point.

Operator, we're going to go to the next question. I just want to let everyone know, we won't go past the bottom of the hour. We have a lot of folks in queue. We want to get to all your questions. Operator?

And the next question is going to be from A.J. Rice of Credit Suisse. Your line is open.

Hey, A.J.

Good morning, A.J.

Hello, everybody. Best wishes on the transition to all. Maybe just to ask M&A pipeline. A, any update on what you're seeing out there, what the opportunity set looks like? B, does the management transition cause you in any way to pull back or to pivot in a different direction in organic growth prospects? And then just maybe finally on the Pack Health deal? That was obviously not a huge deal, but an interesting one. Does that suggest a pivot, and what's sort of the opportunity there with that acquisition?

A.J., thanks. We continue to believe that we can continue to deliver that 2% growth off our base business going forward. We've delivered that in the past, and we have every reason to believe that we will continue going forward. As I mentioned earlier, we continue to see hospitals looking at what we've done with other hospitals, and opportunity for them to rely on us as their testing partner. And we continue to look at some outreach purchases with hospitals. Labtech was a good example of a regional laboratory and a good piece of the United States that we picked up as well. And we continue to look at acquisitions that build on our portfolio. Remember, we have this lens of focusing on general diagnostics. Jim Davis runs that business, in addition to advanced diagnostics. But the third pieces are those services that take the information that we generate, and we provide services, and we do employer population health. And we built on that business to work with health plans on helping them manage the risk with the data and providing services that help them do that. So Pack Health fits into that direction for the company. We've done some other acquisitions that help us with that direction as well. And we will continue to invest in that space going forward. Also in your question, does the management change slow us down in any way on acquisition activity, I would say to the contrary, Jim's been part of the management team for over eight years. He's highly engaged in all acquisitions. He's been instrumental in executing all of our acquisitions. So Jim, any remarks about the acquisitions and your team to find more opportunities?

No, A.J., as Steve said, I've been part of all 40 of those acquisitions, and it's not going to slow down. We're not going to do anything reckless; we're going to do smart deals. We'll be selective, but we'll continue to build our base business, pursue niche applications to expand our advanced diagnostics portfolio, and focus on hospital outreach deals, including those that are willing to get out of business. We're right there ready to help out.

Okay, great. Thanks so much.

Hey, A.J.

The next question is coming from Patrick Donnelly of Citi. Your line is open.

Hey, Patrick.

Hey. Two questions. Maybe just one on some recent payer negotiations. Obviously, you guys have talked a lot about inflationary pressures and supply chain things. How much does that come up in kind of the negotiations with payers? Are you able to pass that along? I know you guys are in a pretty good place, with payers relative to historic levels. So maybe just talk through some of those conversations and ability to pass price along and price increases in those payer contracts.

Yeah. Thanks Patrick. Well, so there's a lot of attention these days on inflationary pressures. And we think we've handled those questions. We think it's all very manageable for us, in terms of our operational excellence programs, and finding the productivity we need to offset it. So that's one piece of the equation. The other piece is around pricing. And we feel good about what we delivered in that regard. If you look at the results for 2021, what you find is that unit price changes, and this is freezing everything from volume mix, and just looking at unit price changes is below that 100 basis points that we typically are guiding you to dial into expectations going forward. And that's not just for our commercial insurance contract. It's all our businesses, our hospital business, it's our client business, independent of who those clients might be, physicians or some other organization we work with. So we continue to make progress on that. And we're particularly encouraged by the discussions we're having with our plans. We've shared in the past that actually, in several negotiations, we've introduced price increases. And it is actually helping us because there is inflationary pressure across all of healthcare. So therefore, we're not alone. Since we're a labor based business, we can pass along some of those costs to them. So we're making good progress. That also means that even if we have a little more inflation, we've got plenty of Invigorate productivity. And that Invigorate now doesn't need to cover as much price erosion that we have historically. We continue to see hospitals under tremendous pressure, and that pressure has contributed to some price dynamics. But with commercial payers, we're in a good place on prices lately.

Yeah, I just want to remind people of what we talked about over our tenure. We have this Invigorate program, drives about 3% productivity. We call it productivity, because some of it is top line enhancing. It's not all around costs. And we've mentioned the fact that we have these pay-fors. One of them has been price pressure. One of them has been annual labor inflation. As we got priced in a better place that actually was helping with margin expansion. So we have enough productivity to do more than the pay-fors. Now we look at where we are today, and as Steve mentioned, a much better position. I can't specifically say it's related to inflation. But I can assure you that is part of the conversation in addition to PAMA, and the value that we bring. We've really moved the conversation dramatically from when we started here to more about value. And fortunately for us, I can share that in the last three national payer contracts, all three of them, we got an increase. That was modest. But you compare that to where we've been historically, great news. And that also means that even if we have a little more inflation, we've got plenty of Invigorate. And that Invigorate now doesn't need to cover as much of the price erosion that we have historically. The price erosion that Steve shared is really heavily in the clientele, and as we've talked over the last number of earnings calls that comes from the hospital clients who are under tremendous pressure, and also in some states where physicians can do in-office markup, we have that pressure as well. And really with the commercial payers, we're in a good place on prices lately.

That's really helpful. I appreciate it. And then just a quick follow up on COVID. Maybe pricing and volume, you mentioned no expectation for the PHE to continue to be extended in the second half or at least it is not baked in. How do you think about the pricing piece both commercial? Will they wait for the PHE? And then the volume side, you are expecting it to be endemic. A lot of the diagnostic players have obviously talked about multiple years of COVID revenues going out. Just curious on your take there. Thank you.

Yeah. So what we're assuming in our guidance is ranges of what we think COVID testing will be. Obviously, it's going to start higher in the first quarter, it's going to go down, as we're hopeful that this current surge will decline throughout the spring and into the summer. We did get the 90 day extension. We're not planning in the guidance that that will be extended beyond April, but we just don't know. So therefore, we're always assuming the more conservative case. If that were to continue, we would update guidance accordingly. Yes, we do believe there will be some price changes with some of our partners over time. But again, what we've implied in the guidance is some decline in volumes and some decline in pricing. Also the assumption that we're not going to get a renewal of the emergency order beyond the current extension. But again, we don't know that. So Mark anything you'd like to add?

Yeah, just to remind you that the rate CMS determined at $51. While we don't assume post PHE that everything falls immediately there, there's a pretty steep ramp down. For the volume that is in our guidance beyond the PHE in late April, we're assuming significantly lower reimbursement than we've experienced to-date and that we're expecting to get till late April.

Next question?

The next question is coming from Ricky Goldwasser, Morgan Stanley. Your line is open.

Good morning, and best wishes to all of you. Jim you are going to be my fourth Quest CEO I'll be working with. So very excited.

Thank you.

Dating all the way back to Ken Freeman's days. So I just wanted to go back to sort of what the 2022 baseline is. Since this has got like really the bulk of the questions we're getting from investors sort of how should we think about the 2022 normalized baselines that we can build off for 2023? I know that you kind of said in response to one of the questions that in terms of absolute EPS, you are where you expected to be last year. But if maybe you can give us the range, right? We're getting to somewhere between kind of like $7.60 to $7.80 as a normalized based on a restart point. Just wanted to kind of like see if we're in the ballpark. And then off that maybe just qualitatively what are the headwinds and tailwinds that we should think about as we think about modeling out to 2023.

Yeah, so I'm sure you understand Ricky, even if I was willing, I can't really give you an EPS number on the face. So I think the best thing I could do is point you to pre-pandemic revenue and earnings and tell you that if you look at the growth in the base business based on what we're giving in guidance, the profitability is not dissimilar. So you can kind of directionally place where that business might be. And the reason I can't really give is back to what I talked about earlier. Where do I assign the $50 million of pandemic expense? Arguably, if we didn't have COVID testing, we would still have that cost. And you'd say, okay, let's go about your base business. But the truth is that we also have the COVID testing in revenue. So again COVID revenue is going into the base business. And then importantly, when you talk about headwinds and tailwinds, we would expect that cost to go away and should be temporary, because it is specifically tied to CDC guidelines and other things. We talked about some of the others, including supply disruptions. I don't know how long that's going to last. And we all know, it's not just in our business. It's across all aspects of life today, and it's modeled to go away in 12 months, not sure. That's certainly something we want to absolutely make sure that we have what we need. And so we are paying premium costs right now, relative to what we did pre-pandemic, to ensure our patient service centers and laboratories have everything they need. That's really kind of our insurance, which fortunately, we can afford to do right now because we also do have that COVID revenue and COVID margin. So that's the best color I could give you which is the base business is in good shape. We are back to Q4 organically back to where we were in 2019. We've done significant M&A over the last couple of years, we've built the PLS business. So beyond the organic clinical business, we're hundreds of millions of dollars higher.

So to remind you, our base business in 2021 was larger than what we had in 2019. So it has grown. So it has recovered. And we're going to grow on top of that. And that's implied in our guidance for base business. And we intentionally broke out base from COVID assumptions for 2022. So you can kind of dissect what's going on with that business. I keep on reminding you of investments that we're making are part of our base business. And we started those investments in 2021. They continue in 2022, and therefore, that's going to help us accelerate growth. As Mark said, we feel very confident about the profitability of our base business. And by the way, when I said in my introductory remarks, we do not believe COVID is going to entirely go away. It's going to be a permanent part of our portfolio. So you should assume there's some COVID testing in 2023 as well. We will continue to still play a role with our PCR testing. And we believe there's a growing role for serology particularly related to our ability to be able to provide some insight around the protection that individuals have in their bodies. And we're going to have more on that to come. But put it together and we believe the prospects for '23 and beyond are quite bright.

Ricky, I would add one other thing. The base business has recovered to 2019 levels and still there is pent up demand for routine clinical care. If you look at the studies around HIV infection rates, hepatitis C infection rates, the data still indicates that there was a lack of routine clinical care during the pandemic. And we do think that should provide some tailwind going into the later part of this year and next year.

Operator, next question.

And the next question is coming from Brian Tanquilut of Jefferies. Your line is open.

Hey, good morning, guys. And congratulations all around. I guess I'll follow up to that last answer that you gave. Yeah. So as we think about COVID becoming more endemic, rather than what it is today, is it probably more correct to think of this opportunity or this part of your business as something like say, the flu, where some of it's point of care, and then a big small chunk of it sent over to you guys? And then how should we be thinking about the economics if that was the case?

Well, this isn't going away anytime soon. I think obviously, we're going to have COVID in 2023. And we're going to provide testing around that. When somebody has some symptoms, you're ruling out COVID. In many cases, that is a PCR test, and that will continue. Therefore, you don't think about just being flu, but any type of respiratory illness, and it could be a common cold or another respiratory illness. So there'll be continuation of that, going forward. We also keep on highlighting the value of serology. There is going to be increased role for us to provide insight on how much protection people have from vaccines or from natural immunity. And as we know, that's changing over time. People want to have that insight to manage the risk and work with their physician on that. So we think there's going to be increased value in that. We do believe in 2023, this is going to be a permanent part of our portfolio. It's hard right now to scale that and we'll learn more as we get into 2022. But when we think about it, we actually think of this as an additional portion of a product line that we didn't have before the pandemic. So we actually decided that it was helpful to develop these capabilities and then, as Jim said, base business continues to be in really strong shape. We crossed the growth of 2019 sooner in 2021, and our growth prospects continue to be good. So yes, we're focused on what the costs are, but we only make these investments if in fact, we expect to get the returns and you'll see those returns, both in 2022 and in 2023 and beyond.

Yeah, thanks Brian, it's a great question. We can't predict with any certainty what's going to happen. I think the two unknowns are, how comfortable will physicians be with taking the specimen sample themselves in the office going forward? Maybe they'll be very comfortable like that with the flu where they'll handle that point of care test. Or maybe they'll prefer to send it out to a lab. The other one, importantly, is the economics. Payers are going to have a lot of influence on whether this is done in-office or in our labs. Point of care testing, some people do it for faster turnaround times, but a lot of it is done because the provider makes money off of it. So depending on what the payers decide around point of care reimbursement that will have a large influence on how much of this work comes to us and how much of it stays in the office. Jim, any comments?

What we did find during this last surge is we had a series of default partners that we've referred work out to, when we couldn't handle the volume, especially during peak days. At least 50% of those partners have gotten out of this part of the business and decided they just didn't want to remain in the market for that capacity. So while there may be physical capacity out there, some of that capacity, especially on the PCR side, has returned to other clinical work those firms were doing. So that can advantage us in the future, if there is another surge.

The next question is coming from Pito Chickering of Deutsche Bank. Your line is open.

Hey, good morning, guys. Thanks for taking my questions. Steve and Mark it's been a pleasure working with you over the years. Congrats to you, Jim, on this promotion. A lot of questions thrown around the space business. So let me ask this a different way. I believe you guide from an $8.50 EPS range for 2023 was from limited COVID earnings. Can you talk about EBIT margins in 2023 versus the 17% range seen in 2019 without COVID? So I believe within that guidance range you are implying essentially flat margins, with Invigorate offsetting inflationary pressures? Is that the right takeaway we should be leaving today's call with?

We intentionally don't really target or comment on margins, because we believe value creation can come at different levels of margin. We talked about specifically on PLS, where it's great growth and great return on invested capital, and those are the two biggest correlators to shareholder value creation. But they come at a lower margin. So we don't worry about margin per se. To answer your question, there's a pretty broad range over multiple years when you put a CAGR with a couple hundred basis points differential on the top line and bottom line. So there's a lot of different combinations. What I would say is your EPS number that you mentioned is not unreasonable. You can figure out the revenue based on what we said at Investor Day, and then what we're guiding to this year in terms of the base business. At this point, we're not counting on COVID to be significantly larger than maybe a flu business or something like that. But certainly, we don't know and there's a chance it could be larger than that. That will be determined over the next 12 months or so. That's about the strongest color I can give you right now, point you to what we said at Investor Day, and assume that's reasonable if these things don't play out significantly differently from our current view.

I mean, you can do the math. We have provided our outlook and guidance for our mix per share, because we do have a mix of business, we do have some lower margin business that might be a good value-creating opportunity for us. So our guidance for EPS would be expansion of EPS over time, rebasing it for these changes that we've seen for the last two years. Mark has reiterated our belief that our base business will fuel good opportunities for us to continue to deliver against that. By the way, as we continue to gain share, variable gross margin is quite good. And we also believe there's going to be some COVID in 2023. It's hard to size it right now, but it's not going to go away soon.

And the other thing is that I'm not in any position to provide guidance in 2023. So that's why we're focusing on the things we've said. However, when you think about what can happen, COVID can be larger, we don't know. We expect to have a billion dollars of cash this year, so we have opportunities for M&A or share repurchases. Those also aren't specifically contemplated in our 2022 guidance. So that's why locking down to a specific number is difficult and probably not productive. So I would point you to what we said at Investor Day and assume reasonable scenarios.

Great, thanks so much guys.

Operator, next question.

And the next question is coming from Matt Larew of William Blair. Your line is open.

Hi, good morning. The 3% Invigorate target has been aided in recent years as you've consolidated volume onto your two new labs and consolidated into one immunoassay platform. I'm curious, what are the keys going forward here to keep driving those gains? And then maybe the second piece on cost would be separate from some of the extra costs you've called out today related to COVID, clearly, you've built up some infrastructure, both personnel and instrumentation for COVID. I'm just curious how much of that you think goes away as COVID moves to an endemic perhaps you need less extra capacity?

Great, thanks for the question. I'll weigh in and turn to Jim to add to the answer. We've been working on operational excellence for over a decade, and it has become institutionalized in our company culture, and embedded in how we do things. It is a platform for how we're going to continue to grow. So your comment was around costs. We don't talk about cost, we talk about productivity, because there's a lot of aspects of what we do around Invigorate and some actually helps the top line, some actually helps get more output with less labor. And yes, some helps us to become more efficient by using fewer materials. We look at it in aggregate, and we continue to be bullish on our prospects. We believe that it is the ingredients for us to continue to deliver great value. When we do this we improve our quality, our service gets better, and we become more and more productive to be able to make investments to fuel the growth. So it all fits together. We see an enormous opportunity to continue to digitize and innovate in operational excellence. Some of you have toured our latest lab of the future in Clifton, New Jersey and Marlborough. Those are examples of where we are consolidating and bringing learnings into other labs. Jim and the team are taking that and thinking about what's next. We continue to invest in the space. We've been putting about $40 million a year into our capital budget, which funds innovation that allows us to fuel this productivity program. Jim?

Steve has touched on three key themes: automation, use of artificial intelligence, and the continued digitization of so many processes. Marlborough and Clifton are terrific examples, and while they're brand new laboratories, we have 20 plus other laboratories in our network. There are opportunities in every one of those laboratories without building new greenfield sites to continue that automation journey, particularly in processing and fluid handling systems. On the artificial intelligence side, we're deploying systems that help with the readout of images in pathology and microbiology. We're rolling out platforms across our laboratory network that will generate a lot of productivity year over year. As long as we have healthy third party vendors that continue to innovate, those innovations will come to our labs and we'll continue along that 3% productivity journey. I also want to add two examples of productivity outside the lab: logistics and patient draw centers. We can reduce empty pickups and make routing more efficient through technology. In patient draw centers, we can move administrative burdens off the phlebotomist by getting patients to use our website to provide insurance information in advance, allowing the phlebotomist to focus on drawing blood. Those are productivity gains that allow us to do more with the same resources and improve quality.

Operator next question please.

The next question is coming from Tycho Peterson of JPMorgan. Your line is open.

Hi, guys, this is Kapian for Tycho. Congratulations to all. Can you maybe talk toward the percentage of COVID testing that was consumer initiated whether it's through MyQuest, QuestDirect or other non-traditional avenues and how do you see that trending in 2022? You mentioned that there are different costs associated with non-traditional avenues of testing. So maybe can you quantify the difference in margin profiles between traditional and non-traditional?

Yeah, so what I can share is, go back to what we said in the prepared remarks, our consumer business was about $70 million last year, between the base and COVID. Consumer-initiated COVID testing was very small at this point, but strengthening. We're enhancing our website for ordering and testing. We're competing with many stand-up operations in parking lots which draw attention, so we're working on making sure people know they can initiate testing through QuestDirect instead of going to a doctor or hospital. We expect to get stronger and stronger as we enhance our consumer business. In terms of margin profile, it's not materially different between consumer and traditional channels. Consumers can come to our patient draw centers and have it done there, or use home collection kits. The structure differs a bit, but not materially in profitability.

And the next question is coming from Derik de Bruin with Bank of America. Your line is open.

Hey, good morning, guys. Thanks for taking my questions. Can we talk a little bit about the PAMA outlook? So you would assume $80 million that again comes back in 2023? I mean what are the chances that this actually does get resolved, and that the lobbying efforts pay off and gives Congress a little more willingness to listen to this and do it? I mean, there's a chance that it gets resolved differently given what happened. Thanks.

Before Steve addresses that I just want to remind everybody that that $80 million was built into our long term outlook. We just assumed it would happen this year. So again, although it would be a year-over-year hit to us, in comparison the long-term outlook already assumed it would occur. So it's already built in.

Thanks for the question. We were thankful that it was delayed another year to 2023. We think that's good for us, because it gives us time this year to keep working on a permanent fix with Congress. We have been very active working with Congress last year. Congress was very busy with the Infrastructure Bill and other matters, and therefore we're fortunate to have the postponement, but it allows us time this year to keep working on this to get a permanent fix. We're encouraged by the level of bipartisan support, both from the House and the Senate. We made a proposal of what we think should be changed to improve the data collection process and the sampling of market-based data. We continue to support the notion that we should be paid a commercial rate, but we believe CMS's implementation has been flawed. In parallel, we continue to pursue litigation related to CMS's rule. The judge has heard the arguments; we'll see if we get some indication on a decision. So our work this year is to push for a permanent fix to PAMA. We're better positioned now because of the pandemic and the appreciation of the importance of a strong laboratory industry.

And our last question is coming from Eric Coldwell of Baird. Your line is open.

Hey, good morning. Thank you. Masterful job clearing up some of the overriding concerns on core markets today. So thank you. When you went through your list of things that don't repeat or go down significantly as COVID incremental cost overtime staffing challenges, et cetera go away, you mentioned bonuses. And I think it was the one number in the list of call outs that I didn't hear you quantify. I'm curious if we could get the incremental bonus due to the COVID upside profitability in '21. How you think that bonus will normalize, whether it's '22 or '23? And then my follow-up, I'll just stow it in here. I was hoping we could get average way to reimbursement in the fourth quarter. I know you said it would be relatively similar through the PHE. But if you could give us a little more specificity on where AWR came out in 4Q on COVID PCR testing, that would be helpful. Thanks.

Sure, let me start on reimbursement. AWR in Q4 was similar to previous quarters and our turnaround time performance was strong. In January when the surge came, we did see a modest impact on turnaround time, but it's contemplated in our guidance and wasn't a huge amount. On bonuses: most of it is really for our 50,000 employees. People think bonuses must be senior management, but most of the cost is our wage employees. We pay about a 3% bonus to many wage workers and then higher targets for other staff. Every year we budget for the expected payout. Based on performance, we've historically paid around target or slightly above. The COVID surge in revenues enabled us to pay our employees significant bonuses in 2020 and again in 2021. We also paid out one-time $500 payments to the majority of our employees to compensate them for COVID-related expenses. In 2020, we adjusted that out of our adjusted earnings, because it was extraordinary. In 2021 we did not adjust it out. That payment was over $20 million. So those bonus-related costs are temporary and would not be expected to repeat unless we have another surprising COVID year in 2022 like we had in 2021.

That's a great response. Any chance you could frame that as incremental $50 million, incremental $100 million just directionally can we get a little closer?

Yeah, let's say it's less than $100 million, but substantially more than $50 million.

Okay, that's about what I thought. Okay. Thank you very much, guys. Congrats to everyone.

Thank you. Very good. Well, thanks, it's been a great session with you all. Thanks for all the great questions. And again, thanks for joining the call today and we appreciate your support. You guys have a great day.

Thank you for participating in the Quest Diagnostics fourth quarter and full year 2021 conference call. A transcript of our prepared remarks on this call will be posted later today on the Quest Diagnostics website at www.questdiagnostics.com. A replay of the call may be accessed online at www.questdiagnostics.com/investor or by phone at 1-800-839-9317 for domestic callers or 203-369-3605 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern Time on February 3 until midnight Eastern Time, February 17, 2022. Goodbye.